U.S.-Japan Trade Rift Looms Over G-7 Meet

By Laura Garza, Militant, Vol.59,
no.25, 26 June 1995

As representatives of imperialist powers gather in Halifax, Nova
Scotia, for a meeting of the Group of Seven - the governments of
Britain, Canada, France, Germany, Italy, Japan, and the United States
- the trade dispute between Tokyo and Washington is evidence that
diverging interests, not common goals and policies, will more and more
mark the exchanges among these capitalist powers.

We're not going to blink, said Mickey Kantor, the
U.S. government's trade representative, referring to the Clinton
administration's decision to enact stiff sanctions on luxury car
imports from Japan if Tokyo does not agree to U.S. demands by the June
28 deadline.

Tokyo is breaking with a pattern of eventually giving in to
U.S. demands, refusing to buckle under pressure to import more
U.S.-made cars and car parts. Capitalists in Japan recognize that they
are in for rough times. Since 1992 Japan has been in a recession, the
longest and deepest since World War II, and no significant upturn is
in sight.

Japan's employing class faces a growing banking crisis. The
ministry of finance recently admitted banks are carrying problem loans
totaling $474 billion, the equivalent of more than 8 percent of
Japan's total economic output last year. No Japanese bank has
failed since World War II, but this is being openly discussed as a
possibility today.

In the 1980s banks made generous loans to those who fueled a
speculative burst in land prices. But today real estate prices in
Tokyo are at 50 percent of their 1991 peak and still falling. The bad
loans are piling up and there is little sympathy among workers and the
middle classes for the idea of bailing out the landlords and bankers
with public funds.

Life-time employment coming apart Japan's much touted pledge of
life-time employment is also coming apart, as companies embark on the
inevitable course of trying to drive down wages, while increasing
production with fewer workers.

While companies have not yet implemented massive layoffs, many are
cutting back. Some are shifting production to other Asian countries
where labor and other costs are lower. Unemployment now stands at 3.2
percent, with anyone who has worked an hour in the last week of a
given month being counted as fully employed.

The bleak economic outlook has bolstered the determination of
Japan's business barons not to give in to U.S. capitalist
dictates. The U.S. government has cases involving Kodak and Federal
Express in line after the auto parts dispute.

Washington gets little support The Clinton administration's
strong-arm tactics are gaining little sympathy elsewhere. From Asia to
Europe, government representatives fret openly about the dangerous
precedent that would be set, and the impact it could have on their
trade relations, if Washington succeeds in forcing Japan to accede to
its demands.

The European Union has condemned the U.S. government decision to
unilaterally enact sanctions. The auto bosses in Europe fear their
sales could suffer if Japan is forced to buy U.S. parts. The European
Union also took advantage of the dispute to get Japan to ease some
restrictions on importing cars from Europe.

Meanwhile, as the U.S. government tries to portray the trade dispute
as a self-contained element in an otherwise stable and amicable
relationship with Japan, Tokyo announced it's refusal to go along
with the U.S. embargo against Iran. Japan receives 400,000 barrels of
oil a day from Iran. The Japanese government also provides one of the
few sources of credit and financing for Tehran. Last month, under
U.S. pressure, Tokyo suspended payment destined for a dam project,
though they stressed the deal was not canceled.

As the tariffs deadline approaches, fear of possible retaliation by
Tokyo and a spiraling dispute has some capitalist spokespeople pushing
for a resolution before going to the brink.

This seems to us an especially dangerous time and place to
experiment with trade-closing devices, warned the Wall Street
Journal editors.